This tax reform may become an important turning point for Japan's Web3 industry.

Written by: TaxDAO

Related News: The 2025 Tax Reform Outline Clearly States "Discussion on Re-examining the Tax System for Virtual Currencies" and Shows the Path for Separate Taxation

Author: CoinPost

The tax reform outline for the 2025 fiscal year has recently been clarified by the tax investigation committee of the Liberal Democratic Party and Komeito, proposing a review of the tax system for crypto assets (virtual currencies) to pave the way for implementing separate taxation. According to the reform proposal, the future tax rate for crypto assets may be reduced to 20%, while allowing for loss offsetting. However, the implementation of the reform still requires necessary legal preparations, including investor protection, suitability requirements for transactions, and the obligation for exchanges to report transaction details to tax authorities.

Takuya Hirai, a member of the LDP's Digital Headquarters, has submitted an urgent proposal to the Financial Services Agency, suggesting that the profits from crypto asset trading be included in the scope of separate taxation as soon as possible, while also improving the regulatory framework to ensure that crypto assets contribute to the national economy.

Analysts point out that this will help attract more domestic and foreign companies and investors, promoting the development of Japan's Web3 industry and enhancing its international competitiveness.

This initiative signifies that the Japanese government is seriously considering improving the tax system for crypto assets to strengthen international competitiveness in the Web3 field. Currently, Japan classifies profits from crypto asset trading as "miscellaneous income," with a maximum tax rate of 55%. This high tax rate, along with taxation on trades between cryptocurrencies and the inability to offset losses across fiscal years, is seen as a major barrier to innovation in the Web3 sector, leading to a significant outflow of talent and startups overseas. Although the reform plan is still in the "review stage," the explicit mention of this issue in the tax reform outline indicates that Japan has taken an important step towards improving the tax system for crypto assets.

TaxDAO Brief Commentary:

Japan's cryptocurrency tax policy is notoriously strict. The current policy classifies profits from crypto trading as "miscellaneous income," with a maximum tax rate of 55%, and taxes exchanges between cryptocurrencies, disallowing loss offsetting across fiscal years. These regulations undoubtedly impose a heavy burden on individual investors and businesses in crypto assets. The current tax reform plan proposes to explore "separate taxation" for profits from crypto trading. Simply put, this means treating profits from crypto asset trading separately, potentially applying a fixed tax rate (expected to be around 20%) and allowing for loss offsetting across fiscal years. This is good news for investors as it alleviates their burden, and for businesses, it means greater financial flexibility and more predictable tax planning. In a horizontal comparison, Japan has already missed several opportunities in the Web3 space. In contrast, Singapore, due to its zero capital gains tax policy, has attracted a large influx of Web3 projects and funds, becoming a popular destination for global Web3 innovation. Japan clearly hopes to readjust its tax policy to re-attract projects and talent, thereby enhancing its competitiveness in the Web3 field. In fact, this tax reform is not the first effort by the Japanese government to develop the Web3 industry. Recently, in August 2024, Japan held the "Web X" conference, where Prime Minister Fumio Kishida spoke as a special guest, receiving a positive response.

If this tax reform plan is implemented, its effects will be immediate. On one hand, domestic companies, especially small startups, will benefit the most, as the reduced tax burden allows these companies to allocate more resources to innovation and operations, enhancing their market competitiveness. On the other hand, this tax reform plan will improve Japan's image among international investors, attracting more overseas Web3 projects to choose Japan as their Asian base, and it may even spark a wave of interest in crypto assets in Japan. However, the tax reform still faces several challenges before implementation. For example, this tax reform requires a series of supporting measures, such as improving investor protection mechanisms, enhancing tax transparency, and increasing transaction compliance. Additionally, the tax reform may temporarily reduce tax revenue, which could raise concerns among the public and relevant departments. Furthermore, Japan's policy execution tends to be conservative, and whether it can truly seize the global window of opportunity for the crypto industry and the entire Web3 sector remains uncertain.

In the future, when we look back, this tax reform may become an important turning point for Japan's Web3 industry. This is not only an incentive for businesses and investors but also a statement: Japan does not want to continue missing opportunities but hopes to embrace the Web3 industry more actively. If it can truly deliver on its promises, perhaps in the next bull market, Japan will become the focus of global investors.

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